Sterling crashes

Pound versus the Euro

The reduction in the value of the pound in the last few weeks and the complete crash of last week will affect those planning to buy a property in Spain.

For those already committed to a purchase who have signed a Private Purchase Contract the fall will affect them immediately. A fall of fx rates from 1.21% to the 1.11% seen can affect the cost by € 10k on every 100k.

If there is time within the agreed contract a buyer could consider taking a Mortgage in Spain to help mitigate this extra costs and to manage the loss over a period in time and or hedge against the pound recovering somewhat in the next few months.

Mortgage in Spain

A loan in Spain will cost about 4% of what is borrowed to set up but with a good range of fixed rates available that fix the rate for the full term this might be a better option than losing out now.

If the pound recovers in the short to medium term many fixed rates have reasonable early redemption penalties that allow the capital to be paid back when it suits the borrower.

For those potential buyers who are not yet committed but wish to continue looking at Spain for a second home getting in place a fiscal approval for lending before searching for property will give them peace of mind on budget and overall costs leaving only the deposit monies and costs open to exchange fluctuations.

Longer term affects

In the current environment Spanish Banks are being cautious on debt to income ratios ad there may come a time when they assess this against a pound that is the same as the Euro in terms of value.

It will remain to be seen how much affect this drop in sterling will have on the overall market in Spain given UK buyers are the most prolific after Spanish residents.


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